Urbanisation, the rise of global middle class, technological trends and geopolitical scenarios are posing major implications for the real-estate sector and demand for grade-A assets in the short to medium term. The demand that is driven by economic and cultural motivations is expected to continue growing.
While the properties have remained a key part of a city’s infrastructure, their dynamics keep changing. Every decade, the dynamics of a city change and accordingly, the real estate and its valuation. When the Information Technology (IT) sector made its way to Gurugram and Noida, and industrial estates were established in Faridabad, they brought grade-A asset class to these cities and drove their transformation.
The cities witnessed the development of support physical and social infrastructure to cater to the demand for prime real estate. Gurugram developed as an IT hub as Delhi’s infrastructure had no scope for development to cater to the many firms that started coming in.
Analysing the property market to decide the highest and best use of an asset:
Case study: Akash inherited a property in Delhi’s Connaught Place from a self-owned property portfolio, his brother Nitish a factory in Faridabad, while his sister a villa in Noida. Except Akash, the other two siblings are of the view that they have not been given a fair share.
Specific to this case, if Akash inherits the property in a prime location and his siblings in a developing location, it is important for siblings to note that the property in a developing location may have more chance of value appreciation in the next few decades. A property in a prime location may not see the kind of value appreciation as the areas in the city periphery.
As property consultants, we evaluate how the city is growing and provide an outlook of the properties and market at large. We value a property as on date with an idea of the current market dynamics but also keeping in mind the future. As experts in the industry, we have the capability to analyse the present and predict the future of the property market. Hence, we can give an expert opinion on a property based on its location, city growth dynamics, development control norms, upcoming new asset classes such as data centres, in-city warehousing, co-living, rental housing, etc.
As consultants, we also opine on which asset class is in demand today and will be in demand in future. For example, warehousing is witnessing growing demand across India. Initially, the demand for warehouses was in the city’s periphery; it is now moving inside the cities. Therefore, certain properties including defunct industries which were lying vacant for a long time could not be used effectively.
Such properties had limited use and thus, minimal demand. But now, there is an opportunity to use such properties for ‘In-city warehouses’, serving as last-mile delivery centres. With the exponential growth of e-commerce business, just in time and same-day delivery models are becoming key differentiators, such ‘In-city warehouses’ also help in minimising transport costs. ‘In-city warehouses’ are a niche in Indian cities but a proven asset class in international markets.
Dynamics and utility of a property change as per the market. Upon consulting property experts, the family can understand the highest and best use and future prospects of a property. They can help decide property valuation and fair share between the siblings, after evaluating real estate dynamics, development control norms, growth factors, possible end-uses, demand-supply dynamics, highest and best use of a property and other parameters such as physical and social infrastructure of the region.Now as the real estate industry is gradually emerging from the after-effects of COVID-19 and high inflation that is caused by the Russia-Ukraine conflict and other geopolitical issues, it will face several shifts that will shape its future. The rapid economic and social changes along with the ongoing expansion of the real estate landscape in India will set the tone for valuation of real estate assets in the coming years.